Chapter 39 - Partners' Dissociation and Partnerships' Dissolution and Winding Up

CHAPTER 39

PARTNERS' DISSOCIATION AND PARTNERSHIPS'

DISSOLUTION AND WINDING UP

LEARNING HINTS

1. Dissociation is a change in the relation of the partners caused by any partner’s ceasing to be associated in the carrying on of the partnership business. Dissociation can be caused by death, retirement, expulsion or any number of other causes. Dissociation is either wrongful or nonwrongful, and there are different consequences to the dissociating partner depending on which it is.

2. Nonwrongful dissociation can include such things as death of a partner, withdrawal of a partner at any time from a partnership at will, and withdrawal in accordance with the partnership agreement. Any partner also can nonwrongfully dissociate within 90 days after the dissociation of another partner.

3. Upon nonwrongful dissociation and in the absence of a provision of a partnership agreement, RUPA provides that the nonwrongfully dissociated partner is entitled to payment of her partnership share within 120 days of a written demand for payment. If there is a dispute as to the amount, the partnership must pay the dissociated partner in cash at least the value estimated by the partnership within such 120 day period, and the parties can then resolve their differences thereafter.

4. If a partner wrongfully dissociates herself from the partnership, she is entitled to her share of the value of the partnership interest, less damages caused by that dissociation. Discuss at least three circumstances that would constitute wrongful dissociation.

5. If there is a dispute among the partners during winding up, litigation may result. The partners can minimize this risk by addressing dissolution issues in their written partnership agreement.

6. Distinguish the following terms: dissociation, dissolution, winding up, and termination.

7. How does a dissociated partner avoid liability for obligations incurred by the partnership after such partner has dissociated? Discuss how RUPA handles that issue.

CHAPTER OUTLINE AND KEY CONCEPTS

  1. Learning Objectives
  1. Dissociation

A. A partner’s ceasing to be associated in the carrying on of the partnership business

B. Nonwrongful Dissociation

1.Examples

2. Consequences of Nonwrongful Dissociation.

C. Wrongful Dissociation

1. Examples

2. Consequences of Wrongful Dissociation

D. Acts Not Causing Dissociation

E. Effect of Partnership Agreement

III. Dissolution and Winding Up the Partnership Business

A.Events Causing Dissolution and Winding Up

1. Effect of Partnership Agreement

2. Example: Schwartz v. Family Dental Group, P.C., 943 A.2d 1122 (Conn. App. Ct. 2008)

B.Joint Ventures and Mining

C.Performing Winding Up

D.Partner’s Authority during Winding Up

1. Express and Implied Authority

2. Performing Executory Contracts

3. Borrowing Money

4. Apparent Authority

E.Disputes among Winding Up Partners

1. Example: Paciaroni v. Crane, 408 A.2d 946 (Del. Ct. Ch. 1979)

F.Distribution of Dissolved Partnership’s Assets

G.Asset Distributions in a Limited Liability Partnership

H.Termination

IV. When the Business is Continued

  1. Successor’s Liability for Predecessor’s Obligations
  2. Dissociated Partner’s Liability for Obligations Incurred while Partner
  3. Dissociated Partner’s Liability for Obligations Incurred after Leaving the Partnership

D. Effect of LLP Status

E. Buyoutof Dissociated Partners

1. Example: Warnick v. Warnick, 133 P.3d 997 (Wyo. S. Ct. 2006)

V. Partners Joining an Existing Partnership

A. Liability of New Partners

1. Effect of LLP Statutes

39-1